Anti-Money Laundering Directive

As Siân Jones told us, EU officials had been working on the new law since February, talking with virtual currency and prepaid card stakeholders and others, to draft the proposed new directive amending the 4th Anti-Money Laundering Directive.

The primary driver behind the proposals has been to remove anonymity from payments in order to combat terrorist financing, action triggered by the Paris (and later Brussels) attacks. At present, they are just proposals for a new directive.

However, the proposals are very likely to be adopted by the European Council and European Parliament (become law). The directive then has to be harmonised into national legislation in the 28 member states. However, the European Commission is pushing for harmonisation of the 4th AMLD to be completed by 1 Jan 2017.

“No doubt, fraud and money laundering should be reduced. However, there should be an appropriate balance to be sure that it's not harmful for innocent people. Therefore, the question is if there is a proven link between anonymous transactions and the level of illegal activities. The current maximum limit for anonymous transactions of EUR2,000 does not look too high as people are allowed to have more in cash when crossing country borders.”

Effect on Bitcoin

The Committee proposal will not affect the personal wallets or the use of Bitcoin. It constitutes the first initiative to apply the plan of action drafted in February in order to shut off the financing of terrorism, and is included also in a wider effort for the aid of tax transparency and the fighting of tax abuses.

Jones, who addressed the European Parliament's public hearing on virtual currencies earlier in the year, says:

"The draft directive was much expected and in line with the Commission's Action Plan on combating terrorist financing announced in February. I am pleased the Commission has listened and decided to drop some of its more radical proposals. However, EDCAB continues to make representations to the Commission, MEPs and member states, particularly regarding scope and definitions."

She underlines that several governments would like to move entirely to digital payments, which they can monitor more effectively.

Jones notes:

“This is not something many in the Bitcoin community support. On the other hand, the general public appears largely indifferent. For some time, many virtual currency exchanges have been asking to be regulated, as a means of to legitimising their businesses.”

However, she doubts that policymakers and legislators are too concerned about the Bitcoin protocol at a technical level as they are not looking to regulate virtual currencies themselves (for now) but rather the fiat/virtual currency gateways.

Under the Commission's proposals the threshold for making anonymous payments with pre-paid cards was lowered to 150 euros ($167.28) from 250 euros. As Jones reveals to us, first the Commission considered banning anonymous prepaid cards altogether. But in the end, it settled on a limit reduction from €250 to €150. Under the new proposals, issuers will need to carry out KYC on prepaid cards over €150.